New data shows that among heartland states in the U.S., Ohio lags behind its peers in the amount of venture capital flowing to its homegrown startups.
America’s Mighty Middle Report, published by Crunchbase and Omaha-based Dundee Venture Capital, shows that over the last decade, Ohio companies have raised just $4.5 billion.
The figure is small compared to states like Texas, whose startups received $24 billion, Illinois, whose startups raised $15.4 billion, and Colorado, which saw $11.4 billion. Ohio also lags behind Pennsylvania, Michigan and Minnesota.
The report defines the Mighty Middle as the 25 states in America’s heartland, bounded by the Rocky Mountains and Appalachian Mountains.
The report shows that total venture capital invested across the Mighty Middle region over the past decade topped $92 billion. Investment dollars grew from $5.8 billion in 2010 to $20.2 billion in 2019, a 247 percent increase.
The surge in investment dollars can be attributed to large, late-stage deals, according to the data. In Ohio, Columbus-based Root Insurance raised one of the largest mega-rounds of the last decade at $350 million.
Though the data presents encouraging findings, it also shows significant gender disparities when it comes to funding. Female founders in the Mighty Middle region have not raised larger, late-stage rounds at the same rate as their male counterparts. Of venture capital raised from 2010 to 2019, just 3 percent was invested into female-only teams, 7 percent in female and male teams, and 90 percent went to male-only teams, according to the data.
“Gender parity in the entrepreneurial ecosystem is a long way off,” the report states.
Of the 47 startup exits in the Mighty Middle, 28 of them valued at more than $500 million occurred from 2015 to 2019. Some of the most public and valuable exit deals in the region include Indianapolis’ ExactTarget, which was purchased by Salesforce for $2.5 billion in 2013, Chicago’s Grubhub, which had a $2.7 billion valuation at its IPO in 2014, and Ann Arbor, Mich.’s Duo Security, which was acquired by Cisco for $2.3 billion in 2018.
“With at least five unicorns minted in 2019 alone and exit activity more than doubling over the decade, the strengths of America’s Mighty Middle ecosystems have yielded strong results,” the report states.
And investors have noticed the momentum among young companies in the heartland. The data shows that coastal venture capital funds have steadily increased their investment in the region. Some of the most active coastal VC firms investing in the Mighty Middle include Los Angeles-based Backstage Capital and San Francisco-based Right Side Capital Management, according to the report.
Additionally, Revolution’s Rise of the Rest Seed Fund, based in Washington, D.C., has had a meaningful impact on VC activity in the heartland. The firm, which has raised $300 million across two funds since 2017, focuses on investing in seed-stage companies outside of the coasts.
Recently, the VC activity in the Middle Mighty region has slowed due to impacts from the Covid-19 crisis. The pandemic has slowed down the economy and investing across the U.S. as well.
The report shows that in the first quarter of 2020, $2.5 billion was invested in the Mighty Middle, down from the fourth quarter of 2019, when companies raised $4.7 billion and the first quarter of 2019, which saw $3.8 billion invested. 2020’s Q1 investing was down 47 percent quarter over quarter and 34 percent year over year.
“Crunchbase does anticipate a slowdown in the second and third quarters as venture investors assess the impact to their portfolio companies and reevaluate startups in a changed business environment,” the report states.
